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| Money Laundering:
The scale of the problem |
A wave of money laundering is
sending shock waves through banks, building societies,
lawyers and police. Fear of terrorist money, growing
evidence of black Russian money washing through London,
mushrooming credit card fraud have come together to terrify
our law enforcement agencies, intelligence services,
and, finally, at the end of the line, our banks.
This surge of black money undermines our belief in the financial system
and allows many evil traders in drugs, weapons and stolen goods to profit
by the City's good name and go free. No less than £2 trillion of
black money is believed to circulate through London banks at any one time.
London's name is now too often linked with that of Switzerland as an easy
touch for money launderers. Who has forgotten the way banks in both countries
accepted the ill-gotten millions of former Nigerian leader, President Abacha
without blinking? How could this country have hosted for so long the corrupt
banking empire of the collapsed Bank of Credit and Commerce International?
Yet, in spite of the damage these failure wreak on our reputation, there
is a widespread belief that government lacks commitment to the fight against
financial crime. Government appears oblivious to the need to spend heavily
on training policemen in fighting complex financial crime. No more than
500 trained financial investigators investigate crime which runs into billions
of pounds. This undermanned service achieves pitiful results. In the last
year, there were just 129 prosecutions and 50 convictions for money laundering.
The Government's own National Policing Guidelines -- the standard set by
the government for police priorities - give the game away. Serving policemen
trying hard to put a cap on the burgeoning tide of black money are demoralized
by the fact that financial fraud barely receives a mention in this key
document.
Rosalind Wright, the former director of the Serious Fraud Office and a
stalwart of the enforcement system, said recently that Chief constables
were reluctant to put money and men into fraud investigation when government
was encouraging them to investigate muggings and burglaries. No-one can
doubt that these are the crimes that we fear most, but if this country's
banking system is to regain its global financial credibility, the more
esoteric money laundering and fraud offenses must be seen to be tackled.
The government's failure goes deeper further than its neglect of the police.
The system it provides for transferring cases to the police for investigation
is falling apart at the seams. A report published on Tuesday called for
a complete overhaul of the system which government relies on to spot terrorist
money, as well as fraudulent black money.
The system of tracking terrorist funds is supposed to snap into action
when a bank notices a suspicious name or movement of cash. The bank follows
the money to confirm its suspicion before notifying the government agency,
called the National Criminal Intelligence Service. NCIS Despatches the
Special Activity Report to the relevant police department. In the case
of a terrorist suspicion, the SAR is sent to the Special Branch. This liaises
with the intelligence service.
The problem here is that NCIS is completely overwhelmed by SARs. The number
has jumped in the last three years from 18, 000 in 2000 to 63,000 last
year (2004) and, although NCIS staff has increased, its performance has
stalled. NCIS is now like a mailbox stuffed full of letters that no-one
reads let alone answers. All those engaged in acquisitive crime, and that
is no less than 70% of all criminals, must be laughing all the way to the
bank.
The banks too are up in arms. They have invested heavily in technology
to track the suspicious transactions, they have hired staff to spot the
fraudster and the terrorist financier, and they have trained their cashiers
to be suspicious, only to find that their reports are languishing in a
policeman's mailbox. Carol Sergeant, a senior figure at the Financial Services
Authority, which regulates the banks, expressed all bankers' frustration
recently when she said that NCIS was 'swamped' and the reports her banking
colleagues produced disappeared into a black hole. Draconian treatment
of bankers who fail to report suspicious transactions - including prison
-- makes the government's failure to produce a competent reporting system
all the more bitterly ironic.
Government and police are not alone responsible for this national failure.
Banks too have let the side down. When George Bush declared a war on money
laundering in the wake of the September 11 outrage, they went into overdrive
in reporting the least suspicion. They were so concerned about missing
a terrorist account on their books and later being found to have handled
dirty money that that they went well beyond examining the black listed
names and organizations produced by the US government. Police say they
reported Islamic organizations and people without sufficient investigation.
In the end , the British authorities were not only unable to investigate
every report, but lost faith in the process.
This is to the detriment of the country's safety, as well as to its financial
well-being. Terrorist and dirty money needs to be intercepted and seized,
and banks are the first policemen to spot it and alert law enforcement
authorities. This is a system that badly needs to be joined up. While banks
must be supported by a government that understands their role in the system,
police efforts need to be invigorated with more training, closer links
with the financial community and more defined targets. Until this is achieved,
those peddling the fruits of financial crime will push at every weak point
in the system, and become rich at our expense. Worse still, terrorists
will have a route for moving money around the world that leaves none of
us secure.
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